TUI Travel buoyed by strong summer 2008 trading

TUI Travel, Europe's biggest travel firm, said demand for summer holidays remained strong as it reported a lower first half loss, sending its shares over three per cent higher yesterday.

The group, created last year from the tie-up of TUI travel division and First Choice, made an underlying loss before tax of £ 294 million in the six months to March 31, versus a £339 million loss the year before. It said the improvement reflected strong performances in the UK and Nordics and a "significant turnaround" in France.

TUI Travel said this summer UK mainstream sales are up eight per cent while it has 21 per cent less product left to sell compared with the previous year. The group added that it has achieved "strong pricing" over the last six weeks.

Trading for winter 2008/9 has also started strongly, it said, with sales up 15 per cent in the UK on 16 per cent less capacity.

The group said it is seeing "no indication that customers are trading down or altering their holiday plans as a result of economic conditions".

TUI Travel said discussions are continuing with Germany's Lufthansa LHAGe.DE regarding a potential merger of Lufthansa's Germanwings airline with TUI's TUIfly.

The talks have been ongoing since January and have taken longer to reach fruition than sector followers had expected.

Chief executive officer Peter Long told reporters, however, that no "adverse conclusions" should be drawn.

"I don't want to be tied to a particular timing. The deal has complexity and we're working our way through that complexity. We're having substantive talks," he said.

He said the group has made the wording of its guidance on annual merger synergies more optimistic - now targeting "at least £150 million" by 2010, from straight guidance of £150 million previously.

"We're restating our confidence of the £150 million and we've changed the wording. Eight months in we're very confident of reaching that target," said Mr Long.

TUI Travel has acquired 10 "niche specialist" businesses in the year to date for a maximum of £85.2 million and said it continues to "explore a significant number of opportunities".